SunTrust 2005 Annual Report Download - page 88

SUNTRUST  ANNUAL REPORT86
SunTrust and its subsidiaries file consolidated income tax returns where
permissible or required. Each subsidiary generally remits current taxes to or
receives current refunds from the Parent Company based on what would be
required had the subsidiary filed an income tax return as a separate entity.
Deferred tax assets resulting from state net operating loss carryforwards
consist of . million (net of a valuation allowance of . million) for
 and . million for . The state net operating losses expire, if
not utilized, in varying amounts from  to .
The Company’s federal and state income tax returns are subject to
review and examination by government authorities. Various examinations
are now in progress. In the opinion of management, any future adjustments
which may result from these examinations should not have a material
effect on the Company’s Consolidated Financial Statements.
NOTE  • Employee Benefit Plans
SunTrust sponsors various incentive plans for eligible employees. The
Management Incentive Plan for key employees provides for annual cash
awards, if any, based on the attainment of the Company profit plan and the
achievement of business unit, as well as, individual performance objectives.
The Performance Unit Plan (“PUP”) for key executives provides cash awards,
if any, based on multi-year earnings performance in relation to earnings
goals established by the Compensation Committee (“Committee”) of the
Company’s Board of Directors.
The Company provides stock-based awards through the SunTrust
Banks, Inc.  Stock Plan (“Stock Plan”) under which the Committee
has the authority to grant Stock Options, Restricted Stock, and perfor-
mance-based Restricted Stock (“Performance Stock”) to key employees of
the Company. Under the  Stock Plan, a total of  million shares of
common stock is authorized and reserved for issuance, of which no more
than . million shares may be issued as Restricted Stock. Stock options
are granted at a price which is no less than the fair market value of a share
of SunTrust common stock on the grant date and may be either tax-quali-
fied incentive stock options or non-qualified stock options. Prior to ,
the Company did not record expense as a result of the grant or exercise of
any of the stock options. Effective January , , the Company adopted
prospectively the fair value recognition approach and began expensing the
cost of stock options.
With respect to currently outstanding Performance Stock, shares
must be granted, awarded and vested before participants take full title.
After Performance Stock is granted by the Committee, specified portions
are awarded based on increases in the average price of SunTrust common
stock above the initial price specified by the Committee. Awards are dis-
tributed on the earliest of (i) fifteen years after the date shares are awarded
to participants; (ii) the participant attaining age ; (iii) death or disability
of a participant; or (iv) a change in control of the Company as defined in
the Stock Plan. Dividends are paid on awarded but unvested Performance
Stock, and participants may exercise voting privileges on such shares.
The compensation element for Performance Stock (which is deferred
and shown as a reduction of shareholders’ equity) is equal to the fair mar-
ket value of the shares at the date of the award and is amortized to com-
pensation expense over the period from the award date to age  or the
th anniversary of the award date whichever comes first. Approximately
% of Performance Stock awarded became fully vested on February ,
 and is no longer subject to the forfeiture condition set forth in the
original agreements. This early-vested Performance Stock was converted
into an equal number of “Phantom Stock Units” as of that date. Payment
of Phantom Stock Units will be made to participants in shares of SunTrust
common stock upon the earlier to occur of () the date on which the
participant would have vested in his or her Performance Stock or () the
date of a change in control. Dividend equivalents will be paid at the same
rate as the shares of Performance Stock; however, these units will not carry
voting privileges.
Compensation expense related to the incentive plans for the three years ended December  were as follows:
(Dollars in thousands)   
(k) Plan , , ,
Management Incentive Plan and Performance Unit Plan , , ,
Performance and Restricted Stock , , ,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued